Palestine Exchange Research Articles

Does corporate governance moderate the impact of earnings management on capital structure of the listed corporations on Palestine and Amman Bourses

The purpose of this research is to investigate the moderating role of corporate governance on the relationship between earnings management and debt level in capital structure. The paper used a hypothesis-testing research approach to gather data from the annual reports of 13 industrial companies listed on Palestine Exchange and 25 Jordanian companies listed on Amman Stock Exchange from 2013 to 2020. Descriptive and inferential statistics were employed, along with correlation analysis to evaluate linear relationships between variables. The fixed and random effect regressions were utilized to develop the research model. In the case of Palestinian manufacturing firms, the results revealed that Earnings Management (EM) had a significant negative impact on debt level. According to the moderating role of Corporate Governance (CG), larger boards and the existence of female members on the board of directors causes an increase in the high-leverage impact of EM, whereas CEO duality mitigates the high-leverage impact. However, in the case of Jordanian manufacturing firms, EM showed an insignificant impact on debt level. Regarding the moderating role of CG, it was proved that the presence of female members on the board of directors increased the firm’s reliance on debt financing as a result of EM practices, while institutional investors mitigate the effect of EM on debt financing, leading to a decrease in reliance on debt. The findings of this research are suitable for the regulators while formulating policies on the Corporate Governance and the Impact of Earnings Management on Capital Structure. These findings have guided the policymakers that they should enhance their focus on Palestine and Jordan companies to test Corporate Governance Moderates the Impact of Earnings Management on Capital Structure. This study is also helpful for the new researcher while investigating this area in the future.

E-Commerce Use and Financial Performance: Exploring The Moderating Role of Entrepreneurial Competencies in Palestine Stock Exchange Companies

The study aims to identify the role of e-commerce use through the efficiency of entrepreneurial competencies in directing the financial performance of companies listed on the Palestine Stock Exchange via financial performance indicators connected to e-commerce: sales value, and company value. The data for the study sample is gathered from the financial reports of all 49 companies listed on the Palestine Stock Exchange for the four sectors (commercial, service, industrial, and investment) over the 11 years of the study period, 2010 to 2020, resulting in a hypothetical sample size of 528 observations (11 years x 49 companies). A quantitative descriptive-analytical approach was employed, and the data was analyzed using SPSS and Stata software. The outcomes of the study have revealed a positive and significant relationship be- tween the employment of electronic commerce and the financial performance of businesses. In addition, it has been observed that Entrepreneurial competencies play a significant moderating role in the relationship between the use of e-commerce and the financial performance (sales value, company value) of companies listed on the Palestine Exchange. This is the first study to investigate Entrepreneurial competencies as a moderator between e-commerce utilization and business financial performance, based on previous knowledge in the field. The empirical findings of this study give managers and practitioners useful theoretical and practical insights for understanding the relationship between the deployment of e-commerce across all industries in hopes of enhancing company results.

Foreign Investments and Stock Market: Evidence From Palestine

Purpose: This study aims to examine the association between the different forms of inbound foreign investments and the Palestine Exchange (PEX) index to shed light on the nature of that impact.
 
 Theoretical Framework: Several academic studies have examined stock market index factors. Chen, Roll, and Ross's (1986) seminal study on macroeconomic conditions and U.S. stock returns provides an example. Interest rate, inflation, industrial production, risk premium movements, and dividend yield positively explain expected stock return. Abusharbeh and Karim (2016) found that interest and consumer price index positively affect banking and investment firm profits on The Palestine Exchange (PEX). Shahbaz (2013) examined how foreign direct investment affects Pakistan's stock market. Results supported foreign direct investment's stock market complementarity.
 
 Design/Methodology/Approach: The market index and panel quarterly data for inward foreign investments are used in this study. From 2009 to 2022, end-of-quarter data were collected on total inward foreign investments, their sub-components (direct investments, stock portfolio investments, and currency and deposits in Palestine), and the market index (Al-Quds index) closing value. Fifty-six observations were gathered.
 
 Findings: The study found that the overall model integrating all three types of inward foreign investments significantly explains the market index. Foreign portfolio investments (FPI) are significantly associated with the stock market index. However, the results showed that inward foreign direct investments (FDI) and foreign deposits and currency investments (FCI) have no significant impact on the stock market index, indicating that they do not complement or substitute each other.
 
 Research, Practical & Social Implications: This study can help the stock market, regulators, and policymakers create incentives and regulations to attract different forms of inward foreign investments. It also examines why foreign direct investments (FDI) and foreign deposits and currency investments do not complement or substitute stock market development.
 
 Originality/Value: This study provides empirical evidence on the impact of the different forms of foreign investment in Palestine on the stock market. Further research is recommended to explore additional variables that might be significant, such as market capitalization and market volume.

The influence of intangible assets disclosures on businesses’ performance

The purpose of this research is to determine how intangible asset declarations affected manufacturing companies listed on the Palestine Exchange in terms of performance throughout the years [2017-2021]. The study sample consisted of 13 industrial companies listed on the Palestinian Stock Exchange, and in order to verify the study hypotheses, a descriptive analytical approach was followed. Several statistical methods were used, such as random effect analysis. After conducting the required tests, the results of the tests showed that the intangible assets do not have an effective impact on the performance of the companies that were studied, as the relationship was negative and it was not proven that the intangibility of assets had any positive results. However, it was found that leverage has a positive effect on the performance of these companies. The study recommended that the approaches for service and industrial companies should be improved and developed to enhance the level of performance in accordance with developments that occurred in the financial market.

Ownership Structure Effect on the Stock Returns for Companies Listed in Palestine Exchange

This study aimed at identifying the impact of the ownership structure on the stock returns of the public companies listed in the Palestine Stock Exchange. In order to achieve this goal, panel data for the period from 2009 to 2019 was collected from the financial reports of the 46 public companies listed in the Palestine Stock Exchange. In this study, the fixed-effect method was used in the analysis of the study's panel data. The results of the study showed a positive effect of the ownership of major shareholders on equity returns and a negative effect of the ownership of board members on equity returns. Furthermore, the study found no significant effect of institutional ownership, foreign ownership or executive-management ownership on equity returns. In light of the study's findings, the study made several recommendations to investors, legislators and board members regarding the ownership structure and stock returns.

The Impact of Fluctuations in Foreign Exchange Rates on Financial Performance: An Applied Study on the Industrial and Service Companies Listed on the Palestine Exchange During 2014-2019

The Impact of Fluctuations in Foreign Exchange Rates on Financial Performance: An Applied Study on the Industrial and Service Companies Listed on the Palestine Exchange During 2014-2019

The impact of corporate governance mechanisms on corporate failure: an empirical evidence from Palestine Exchange

PurposeThe purpose of this research is to examine the impact of governance mechanisms on corporate failure.Design/methodology/approachThis study used a hypothesis-testing research design to collect data from the annual reports of 35 companies listed on Palestine Exchange from 2010 to 2019. Descriptive and inferential statistics were employed, along with correlation analysis to evaluate linear relationships between variables. The variance inflation factor was used to test multicollinearity, and binary logistic regression was utilized to develop the research model.FindingsThere is a significant positive relationship between board of directors' independency, institutional ownership and the quality of external audit, and corporate failure reduction. No significant relationship has been found among corporate governance variables such as board size, board meetings' frequency, board members' remuneration and audit committee existence, and corporate failure reduction.Research limitations/implicationsSeveral empirical research studies have developed models to predict corporate failure using accounting and financial data. However, limited research has empirically investigated the impact of the different mechanisms of governance on corporate failure prediction.Practical implicationsThe research highlighted the significance of companies' commitment to governance principles and their impact on predicting failure. The study suggests that decision-makers and managers can adopt different governance mechanisms to support corporate success and avoid those that may lead to negative consequences and failure.Originality/valueThis research is the first in Palestine to use a comprehensive list of corporate governance mechanisms to predict the failure of companies listed on the Palestine Stock Exchange between 2010 and 2019.

Budgeting practice, Budgeting reconsidered during covid-19 (A survey on listed companies on the Palestine Exchange)

Budgeting practice, Budgeting reconsidered during covid-19 (A survey on listed companies on the Palestine Exchange)

The Effect of Financial Ratios, Firm Size, and Cash Flows from Operating Activities on Earnings per Share

Purpose: The study aims to examine the effect of Financial Ratios, Firm size, and Cash Flows from Operating Activities on Earnings per Share.
 
 Theoretical framework: Earnings per share are one of the crucial matters of concern to dealers in securities because of their important role in evaluating investments and the risks surrounding them. Since earnings per share are affected by several factors.
 
 Design/Methodology/Approach: The study sample consisted of industrial companies listed on the Palestine Exchange during the period 2016–2020. Secondary sources were used to collect study data.
 
 Findings: The results of the study showed that there is a statistically significant effect of each company's size and financial leverage on stock returns. However, the results of the study showed that there was no statistically significant effect for each of the liquidity and operating cash flows on the returns per share.
 
 Research, practical & social implications: We can consider that financial ratios, return on equity, debt to equity, price to book value, and cash flow from operating activities altogether affect earnings per share.
 
 Originality/Value: The results of this study provide evidence for stakeholders to be able to judge the efficiency of firms by understanding the factors that affect the size and stability of earnings per share.

The influence of corona pandemic on stock returns of companies listed on the Palestine Stock Exchange

Purpose This study aims to explore and verify the influence of the corona pandemic on the stock returns of the Palestinian companies listed on the Palestine Exchange during the period 2020–2021. Design/methodology/approach The research makes use of secondary financial data from 52 companies in the industrial, investment, services, banking and insurance sectors. Many financial ratios are calculated to assess stock returns: current ratio, cash ratio and average collection time as liquidity measures; debt-to-equity ratio as an indication of leverage or solvency; and net profit margin as an indicator of profitability. The research examines ratios between the (2020 and 2021) precorona outbreak using the Wilcoxon signed rank test and financial ratio analysis during the corona pandemic. Findings The findings show that liquidity in the investment, banking, insurance and industrial sectors has decreased significantly, whereas liquidity in the service sector has improved. The statistics reveal a considerable growth in debt in the service sector, while it stays unchanged in the other sectors. However, there is no discernible change in profitability during and after the corona outbreak. Research limitations/implications The present research faced many limitations, such as the approach to gathering primary data, which depended heavily on disclosures, financial reports and secondary data, as well as only analyzing one context and one country. Practical implications The findings of this study can guide the Palestinian government and decision-makers to respond to the COVID-19 outbreak and must act quickly because strong short-term policies are more functional than long-term policy measures. In addition, the temporal discrepancy between their policy actions and financial regulations regarding the stage of the outbreak, integrating monetary treatment methods, strengthening their control over exchange rate fluctuations and extending the duration of financial participation measures that ensure stable exchange rates, such as attempting to restrict trade of the monetary system between countries was assessed to reduce the important monetary stimulation policy. Originality/value This study presents important facts and results for regulators and decision-makers regarding the investment, industry, banking, insurance and services sectors as sectors that are most affected by the corona pandemic as a sample for this study from the Palestinian companies listed in Palestine Stock Exchange due to the corona pandemic.

Relative and Incremental Value Relevance of Traditional and Real Performance Measures: Evidence from Palestine Manufacturing Listed Companies

Purpose: This study seeks to test both incremental and relative value relevance of the Economic Value-Added (EVA) as a real performance indicator and (EPS) as a traditional performance indicator in the context of the Palestine Exchange (PEX) listed manufacturing companies. Theoretical framework: Previous research provided mixed evidence about the superiority of EVA over the traditional performance measures in predicting market value; some studies supported the superiority of EVA (Zimmerman, 1997; Shishanya et al., 2020), while others denied that superiority (Biddle et al., 1997; Agnatia & Amalia, 2018). Testing the value relevance of EVA compared to EPS was rarely conducted in Palestine. Design/methodology/approach: Seventy company-year observations were gathered from 10 of 13 manufacturing PEX-listed companies over seven years (2015-2021); the study employed regression and correlation analysis. Findings: The study found a significant relationship between EPS and stock returns while concluding an insignificant relationship between EVA and stock returns. The study also found that EPS beats EVA. However, the findings showed that EVA adds incremental information content to EPS’s interpretation of stock returns. Research, Practical & Social implications: The study outcomes help and direct the investors and analysts, in assessing the company’s performance and predicting stock returns; it also helps policymakers and regulators in directing and updating reporting requirements. Originality/value: This study adds to the literature on the value relevance of real and traditional performance indices in Palestine. Further research is recommended on other sectors and the whole market.

Reducing Cost of Capital. Do Voluntary Disclosure and Accounting Conservatism Contribute?

Theoretically, accounting conservatism and voluntary disclosure may be used as means to reduce cost of equity. Supportive evidence has been provided by the majority of studies, especially in developed countries. We address this issue by focusing on an underdeveloped country with political instability. The impact of accounting conservatism and voluntary disclosure on cost of capital is estimated using the data belongs to all companies listed on the Palestine Exchange during the period from 2015 to 2019. The results confirm the negative influence of voluntary disclosure and accounting conservatism on cost of capital.

The Internal Determinants of Gender Diversity and Its Non-Linear Impact on Firms’ Performance: Evidence from the Listed Companies in Palestine Exchange

This study mainly aims to test the impact of gender diversity on a firm’s performance. Namely, the non-linear and the quantile impact on the listed companies in Palestine Exchange during the period 2010 to 2020. The study also aims to determine the impact of a firm’s internal characteristics on gender diversity. The study uses instrument analysis, traditional panel models, and quantile regression to fulfil the aims. The results demonstrate the existence of a critical mass for the impact of gender diversity on firms’ performance and that mass is about 30% for the ROA and 41% for the EPS.

The supervisory role of applying governance mechanisms to reduce the effects of the Covid-19 pandemic in the public shareholding insurance companies listed on the Palestine Stock Exchange

The study aimed to identify the supervisory role of applying governance mechanisms to reduce the effects of the Covid-19 pandemic in the public shareholding insurance companies listed on the Palestine Stock Exchange. Governance Committees (72) working in insurance companies listed on the Palestine Stock Exchange, numbering (5) companies, and a comprehensive inventory method was used due to the small size of the study population. The results of the study concluded that the boards of directors of the insurance companies listed on the Palestine Exchange are aware of the limits of their role and responsibility in providing control over management, and applying effective governance mechanisms to manage the state of uncertainty resulting from the Covid-19 pandemic crisis. The insurance companies listed on the Palestine Exchange also disclose the role of Governance mechanisms in contributing to the development of the necessary measures to reduce the effects of the pandemic, and the managements of these companies adopt the application of governance mechanisms in light of the Covid-19 pandemic, which need to provide the necessary support from takeholders. The study recommended that the public shareholding insurance companies listed on the Palestine Exchange should disclose the effects caused by the Covid-19 pandemic on the directions and operations of these companies, and the measures they have taken to address the negative effects resulting from the pandemic that affected their financial and administrative performance. Companies and their boards of directors to develop appropriate mechanisms for corporate governance practices through the participation of many stakeholders and corporate departments to counter the negative effects of the COVID-19 pandemic.

The impact of liquidity efficiency on the profitability – An applied study on the firms listed on the Palestine exchange

تناولت هذه الدراسة قياس أثر كفاءة السيولة النقدية على ربحية الشركات المدرجة في بورصة فلسطين وتهدف الدراسة إلى معرفة أثر المعلومات المستخرجة من قائمة التدفقات النقدية على الأداء المالي، وكذلك زيادة الاهتمام بالقرارات المتعلقة بكفاءة السيولة النقدية بما يعزز ربحية الشركة. تم إسقاط هذه الدراسة على 22 شركة صناعية وخدمية مدرجة في بورصة فلسطين خلال الفترة (2015-2020)، واعتمدت على معلومات لتحليل السلاسل الزمنية المقطعية (Panel Data) عن طريق البرنامج الإحصائي Eviews12. توصلت الدراسة إلى وجود تباين في أثر المعلومات المتعلقة بكفاءة النقدية والمستخرجة من قائمة التدفقات النقدية على ربحية الشركات، حيث توصلت إلى وجود أثر إيجابي لنسبة العائد على حقوق الملكية من التدفقات النقدية التشغيلية على العائد على حقوق الملكية. في حين لم تؤثر نسب العائد على الأصول من التدفقات النقدية التشغيلية و نسبة صافي التدفقات النقدية من الأنشطة التشغيلية إلى المبيعات على ربحية الشركة ممثلة بالعائد على حقوق الملكية. كلمات مفتاحية: كفاءة السيولة النقدية، ربحية الشركات، بورصة فلسطين. Abstract This study examines the impact of cash flow efficiency on the profitability of firms listed on the Palestine Exchange. The study aims to determine the impact of the information extracted from the cash flow statement on financial performance, as well as raising attention to the decisions related to the efficiency of cash flow in a way that enhances the firms’ profitability. The study analyzes the data of (22) industrial and service companies listed on the Palestine Stock Exchange (2015-2020) and relied on PANEL data through the Eviews12 statistical program. The study finds a vary in the impact of the liquidity efficiency information extracted from the cash flow statement on the profitability of non-financial firms. It finds a positive impact of return on equity from operating cash flows ratio on the return on equity. While the ratios of return on assets from operating cash flows and the net cash flows from operating activities to sales do not affect the firms profitability represented by return on equity. Keywords: Liquidity Efficiency, Profitability, Palestine Exchange.

Does Corporate Governance Constrain Earnings Management in an Unstable Economic and Political Environment?

The purpose of this research is to examine the effects of corporate governance structures on earnings management behavior in a weakly governed and politically unstable environment. A panel of data from 35 non-bank companies listed on the Palestine Exchange between 2012 and 2019 was employed. A fixed effects regression model was used to examine the impact of certain board characteristics (board size, board meetings, and audit committee formation) and ownership structures (institutional ownership, foreign ownership, and ownership concentration) on earnings management in the volatile and risky political and economic environment of Palestine. The findings indicate that corporate governance and ownership systems in Palestine appear to be ineffective in constraining earnings management practices. None of the board attributes appear to constrain earnings management practices. However, there is weak evidence to show that ownership concentration has some effect in curbing earnings manipulation. The findings of this study are expected to increase awareness among Palestinian regulators, investors, and other policymakers regarding the role of boards of directors and institutional and foreign shareholders in monitoring Palestinian listed companies to enhance corporate governance and the quality of financial reporting.

A Descriptive Analysis of Corporate Governance Mechanisms and Earnings Management in Palestine

Research aims: The article aims to describe corporate governance (CG) characteristics and the extent of earnings management (EM) practices in non-financial firms listed on the Palestine Exchange from 2011 to 2018.Design/Methodology/Approach: The study employed the quantitative methodology. Collected data were summarized quantitatively using descriptive analysis with STATA 14. CG data were retrieved manually from published annual financial reports, while financial data for the EM calculation were collected from Thomson ONE.Research findings: Listed non-financial firms in Palestine only moderately complied with the Palestinian Code of Corporate Governance. Some Palestinian firms have also established an audit committee, one of the most important corporate governance mechanisms.Theoretical contribution/Originality: The findings provide insight into CG and EM in Palestine for regulators and policymakers. Practitioner/Policy implication: The results can assist policymakers in strengthening existing regulations and updating the current code of CG or introducing new policies to mitigate EM.

The Effect of Applying Balanced Scorecard on Earnings Quality among Banks Listed in Palestine Exchange

This paper aims to verify the impact of applying balanced scorecard on earnings quality controlled by Firm (Bank) size of banks listed on Palestine Exchange during the 2011–2019 period. To achieve this objective, a panel model relating to the dependent variable (Earnings quality) and independent variables (Balanced Scorecard components) with the control variable (Firm Size) was estimated, the researchers used financial reports and disclosures of the banks listed on the Palestine Stock Exchange as a tool to collect data, in addition to books, articles, and the previous studies. Descriptive quantitative research design was employed because of the use of quantitative data as proxies for both independent and dependent variables. Panel research strategy was applied for obtaining the cross sectional and longitudinal dimensions. The relationships between the study variables (Earnings quality, BSC components, and Firm Size) were estimated using Eviews version 7 (a statistical software). The results showed statistically significant negative effect of Customer perspective (CUS) on Earnings Quality (EQ); statistically significant positive effect of Internal Business Process perspective (IBP) on Earnings Quality (EQ); and statistically significant positive effect of Firm Size (FS) on Earnings Quality (EQ). In addition, the results showed no statistically significant effect of financial perspective (FP), Social perspective (SP), Learning and Growth perspective (LG), and on Earnings Quality (EQ). Furthermore, the results demonstrated that Earnings Quality of banks listed on Palestine Exchange was not high.

The Board of Directors and Firm Performance: Evidence from Palestinian Listed Firms

The aim of this study is to examine the effect of board of directors characteristics on firm performance by firms listed on Palestine Exchange for the financials year 2001. Accounting performance measures including return on assets and return on equity are used to proxy firm performance. Characteristics of board of directors are represented by board independence, size, frequency of meetings, leadership structure and diversity. Ordinary Least Squares regression results indicate that board diversity has a negative and significant association with firm performance. However, remaining characteristics have insignificant effect on firm performance. This indicates that the result is not in the line with agency theory. Keywords: Board of directors, Firm performance, Agency theory, Palestine Exchange DOI: 10.7176/RJFA/13-12-04 Publication date: June 30 th 2022

Blockchain Technology for Reshaping Stock Exchanges: A qualitative exploratory study in Palestine

Purpose: This research aims to explore how to reshape stock exchanges by using blockchain technology with an emphasis on the case of the Palestine Exchange. Design/methodology/approach: This research gathered primary data from semi-structured and open-ended interviews. Online interviews were conducted to get information from professionals and academics interested in blockchain. The sample for this research was determined using convenience sampling and a snowball sampling approach. The data was analyzed using the deductive content analysis method. Findings: The research revealed that implementing blockchain is appropriate for third-world countries because it does not necessitate the construction of buildings or infrastructure. Additionally, the results showed that by implementing this technology, the Palestine Exchange will be able to speed up its liquidity cycle while also lowering costs, boosting transparency, allowing for the trading of new products, and attracting new investors. The legal and technological concerns, however, are not seen as impediments to the implementation of blockchain in the Palestine Exchange. Practical implications: The findings of this research will contribute to the growth of the Palestine Exchange. Originality/value: There has not been much focus in studies on Palestine in this context. This research aims to close the gap by investigating how blockchain might be used to reshape the Palestine Exchange.